What Does the CEO Really Need from a CIO?
Allan Z. Loren has a rare perspective on business strategy and technology management. He has seen big business from the vantage point of both CIO and CEO, and he's worked in both capacities to jump-start growth by aligning technology and business strategy.
After a career that spanned four decades in senior management at some of the nation's best-known companies, Loren retired earlier this year as chairman and chief executive of Dun & Bradstreet Corp., the New York City-based financial information firm with $1.4 billion in 2004 revenues. Loren arrived at D&B in 2000, just before it split with Moody's Investor Services Inc., and in his five years at the helm, he led the successful reinvention of the company for the Internet era. Before that, Loren had served as executive vice president and CIO at American Express Co., which also saw significant technology-driven gains during his tenure.
Outspoken and confident in his observations after 45 years in business, Loren champions the importance of meshing IT with corporate strategy. He believes that alignment is not a strong enough wordinstead, he prefers to think in terms of "ownership" of the strategy by the CIO and everyone else in the organization. "My own experience is that a well-defined, well-understood and well-owned strategy is a prerequisite for success, for business success, either as a CIO or as a CEO, or both," he says.
The 67-year-old New York City native graduated from Queens College and did graduate work in math and statistics at American University. Early in his career Loren worked at the National Institutes of Health and Leasco Systems, then as a consultant. By 1971, he had landed at a predecessor of insurance giant Cigna Corp., where he became CIO and also served as chief administrative officer. In 1987, after 16 years at the insurer, Loren became CIO of Apple Computer Inc., and was promoted to president of Apple's U.S. operations a year later. He then served as president and chief executive of Galileo Internationalthe reservation system owned by a consortium of 12 airlinesbefore moving on to the CIO job at American Express.
Senior Writer Edward Cone spoke with Loren about the transition from CIO to CEO and how to make sure that technology supports corporate strategy to maximize growth.
CIO Insight: Has your experience as a CEO affected how you see the CIO job?
Loren: I've always viewed the CIO role as being central to the business, and therefore I've always behaved in a central manner. I always wanted to understand why the business strategy was what it was. And if it wasn't clear enough, I always wanted to push to get that strategy laid out.
Since the technology function touches everything, it really is a business within a business. The CIO is the CEO of technology. I've always had a strong human resources department, a strong finance department, a strong strategy department, all within technology. You have to have a culture within the IT organization. Now, these are all the same things you need to run a business. So when I became the U.S. general manager at Apple, I had all the pieces reporting to me (with the exception of manufacturing and R&D). And when I went to Galileo and D&B, it was a very familiar role. It wasn't a role where I said, "Oh, my God, I haven't seen this before." It had all the same components.
What does a CIO need to do to make sure a company can successfully align its technology with the business to drive growth?
There are three things you'd like to see. _One is, you'd want to make sure there are no barriers to growth because of infrastructurewhich, in my definition, includes a systems development methodology that allows applications to get developed in a timely fashion, so that they are the right applications, at the right cost. It would also include how you deal with internal customers, how you make sure you're not doing duplicative work if you've got multiple business units around. How do you make sure there's sufficient offshoring and onshoring being done? If my costs go up, then I soak up more development dollars than I should, and it limits the amount of development I can do.
The second thing is, you'd want the CIO to be a leader in the reengineering and reinventing of the company, mainly because the CIO, by definition, sees everything in the company and has almost a perfect perspective on how to be more effective and more efficient.
The third leg is that the CIO, like any other senior executive in the company, should be very creative-thinking in terms of how to run the company. So outside of just being the leader of a particular function, the CIO must also be able to help create and drive the strategy of the company, to be not just a functional specialist but an actual leader in terms of the company achieving its strategic objectives. And to the extent a CIO does all of that, he or she becomes a perfect candidate for CEO.
So why don't we see more CIOs moving into the CEO spot?
First of all, it's a hard thing to do. I don't want to say that you'd need a Renaissance person to do that, but you do need a very strong leader. You need someone who is technically proficient enough that they could dabble in the infrastructure piece. They don't necessarily have to be able to design databases, but they have to understand the scalability issue in certain circumstances, as well as know when to call in the experts and whether the experts are giving valid opinions. So they need to be able to interpret all of that. And at the same time they need to be able to sit down and say, "You know, this product is not going to fly this way. It really doesn't fit with our strategy, So why are we building it?" It's a highly skilled position.
CEOs need all the help they can get. I want as much strength as possible around me. If I don't have strong people around me, then I either have to think of things myself and get them on the tablewhich means I have to have all the wisdom in the world, which I don'tor I miss stuff, because I have a less-than-full plate of options to pick from.
A creative leader in terms of helping drive the strategy would be the ideal CIO from my perspective. And there's no reason why CIOs can't play that role. Now, they may not want to, because it may be more dangerous, so to speak, or career-limiting, or whatever. But from my point of view, the broader the role the CIO plays, the higher the probability of not only being successful in the role you're in, but in getting to a higher-level role, whether you want a higher-level role or not. You just have a higher probability of being there.
How has the understanding of the CIO's role in corporate strategy changed over your long career?
As business has become more global and more demanding, strategy has become more and more important, and that certainly carries along the CIO. Today's CIO is more engaged in strategy than I was _in 1971. But I would also say that in 1971, I actually proposed a revolutionary sys-tem for the insurance company I worked foran infrastructure to change the way they serviced their customers, which was the first online electronic system in the insurance industry. So I was pushing strategy at that time, probably without knowing it.
At a company such as American Express, the CIO is running an organization that's larger than many companies. What impact did your IT department have on the overall direction of the enterprise?
Almost everything it doescall centers, renewal of cards, security, all that stuffall flowed through technology. And in the early 1990s, this was a company that was not growing. It was very profitable, with a great brand, but it couldn't get new product out fast, it couldn't get new product out at all. That's when [then-CEO] Harvey Golub started his growth strategy. I had to get the infrastructure in place, be an active driver of reengineering, and be a creative thinker for the technology function to contribute to the success of the company. Which it did. We went from hardly any new products at all, during any given year, to hundreds of new products six years later.
What did your group contribute to that?
More common infrastructure, more common platforms. Various business users using the same applications, which allowed for more rapid development. We said, "We can't put out 20 or 30 new products this year if every single part of the company wants their own bells and whistles on this common product." If there is a product that all parts of the world are going to use, if everybody around the world wants their own version of that, well, how long would that take to install? Forever. And then what happens to a card member who interacts with membership rewards as they travel around the world? You get rid of those bells and whistles, and that allows you to be much more effective at getting platforms out, which allows you to be much more effective and efficient in getting new product out, which drives revenue.
You also faced a growth challenge at Dun & Bradstreet when you came on board as CEO. Did things look very different from that perspective?
As the CEO of D&B, I was almost in the CEO role and the head marketing role and the CIO role all at the same time. Five years ago, it was not clear what the value proposition of D&B was. Through the 1990s, D&B had very little growth, maybe 1 percent or 2 percent a year. Essentially, it wasn't going anywhere. It was profitable but not wildly so. And in 1999, in the middle of the year, it actually hit the wall and had a couple of really bad quarters.
I started in May 2000, and I engaged in a process in which we created for each of our major lines of business a commonly stated value propositionin effect, a presentation you could give to any client, any customer, both at a macro level and at a micro level. And that common statement enabled the technology organization.
The strategy was to create a growth company. Part of the strategy was to deliver the majority of our revenue over the Web. That obviously was supported by technology. We went from many dozens of Web sites to a set of focused Web sites that helped drive revenue. The role of technology was, first, the infrastructure being in place so that the product can get out. So there's a systems development methodology in place. There's lots of offshoring that goes on. More than 80 percent of the development takes place offshore. The cost of technology has been cut literally in half in the past five years, and yet the productivity of the organization has increased substantially.
Did you have a CIO while you were _devising the strategy and making these changes at D&B?
Yes, but the reason I'm not emphasizing that person's role is because my own role in getting the company on the right track, given my marketing background, general management background, and tech background, was overwhelming. It was a critical thing that needed to be done in order to set the company on the right path. So if you asked the head marketer what role he played, he would say he was more of a follower than a leader. And if you asked the CIO, he would probably say the same thing. I would say it was more execution than thought leadership. It was more results leadership rather than thought leadership.
Given your belief that a successful CIO has to be a take-charge type, would you have been able to be the CIO in that situation, to work for a CEO who was doing the thought leadership in your own area?
I'm not sure I understand the question.
Your experience seems to validate the idea that alignment is necessary for growth, and that it has to be understood as an integral part of an effective business strategy.
Yes. The issue is not whether your strategy is better than anyone else's. If you don't understand the strategy and you don't accept it, then you can't implement it, so what good is it? Businesses need a strategy that they can implement, and that then requires both understanding and ownership. I actually use the word ownership rather than alignment, because it's a more powerful term.